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Tuesday, September 22, 2015

Dropping the price and a proactive move

About 10 days ago, we dropped the price of the house $10,000. We didn't want to do it. But it was time.

Back in July when we put the house back on the market with the new realtor, we had an open house for brokers, and the price was the only REAL comment we got from them. Most would have priced the house in this new range, but after talking with the realtor....we left it where it was for the summer. However, part of that discussion was if we got to September and the house was not under contract, we may need to make changes. She asked us if our parents would just give us whatever money we may need. Um, if that was an option, we would have visited it a long time ago.

So we went through Labor Day, and then talked to her about the adjusting the price. We were all in agreement that this was the right decision. It would open up the pool of buyers since most people search in increments of 10k.

We noticed that on Zillow, our number of people who "saved" our house increased about 40%. However, we have only had one showing since we made the change. This coming weekend is a crapshoot...there is a large local fair that people attend and the weather is going to be beautiful! No idea what that will mean for real estate.

If the house sells at the current price (although we were told that most houses sell for 96-97% of the asking price), we would JUST cover the payoff on the mortgage. That leaves all the fees that go along with selling a house....realtor, conveyance, etc. Some things will get refunded down the line, but strictly speaking about going to closing...we will need 10k-12k to just close.

In order to cover the cost of dropping the house....we took out a personal loan. This loan is sort of a 2-part thing. The loan is for 22k at 6.99%, and is $435/mon for 60 months. The first $9400 went to pay off the retirement loan (although I have a feeling that we will end up making a slight overpayment since we paid this off right at the end of a paycycle and there may be an extra payment that will come out of G-man's check, which would be refunded to us). This will free up $441 a month (so a cash flow wash), which will then pay for the new loan. It also starts the 60 day "clock" that we have if we wanted to dip back into our retirement account down the line (possibly to lower the interest rate of the personal loan, money for a new house if that is a route that is open to us).

That leaves us $12,600. We originally were thinking we would need closer to 10k for the closing, and were going to use the difference ($2600) to pay off G-man's car, thus freeing up another $127 a month. However, we got nervous. I have said before, I have a problem with liquid money....I don't like to use it, because what if I NEED it (which contradicts myself since I have a hard time using it!). If we paid off the car, and then needed more for the closing, we would be scrambling. Even funneling all the "extra" money we would have in the budget (roughly $300 a month between everything that we have recently done), it would take 7-8 months to cover that amount. So, we are leaving it liquid.

We have $7000 put aside already for the moving costs (which also includes deposits for utilities, travel, etc). Add in the new $12,600....and we are at just under $20,000 cash. So this will cover the house and the move. And HOPEFULLY will have extra at the end that will then go toward some debt (at the moment, G-man's car, then my car....we are purely looking at cash flow, not at interest rates or long term goals). We also know we will have tax season coming before we know it....and if we move in 2015, our return will be much larger than usual because we will be able to deduct the move....and all of that money would go back into the debt reduction efforts.

I will update the side bar to reflect new numbers soon. So, yeah....a $12k set back. I played with the numbers until my eyes crossed. This was the option that made the most sense on paper.

I do feel better knowing that if we had to move quickly (if a buyer wanted a very quick closing), that we have this taken care of. Our cash flow isn't changing. Nothing really changes....except we now have $12k more in debt. That part....that I don't feel good about.

11 comments:

I know how it feels to lose money on a house but I think it will be best for you and your family to be able to move on from this. I'm jealous when I had to take a loan out to pay closing costs it was at 9.99%. Sending some good juju for house selling!

Mysti, I know this feels like a step backward, but if you can sell and your family is back together again this is so worth it. Remember when my sewer line collapsed? I went backwards over $12,000 just like that! We only owe about $3,000 now and at that time it was the end of the world. You can do this, it will be okay.

New commenter, but long time reader here. I think you're making the right decisions now. The timing is right to lower the price, I think you were right to wait to take these measures. It was worth a shot to get what you needed to avoid paying cash at closing.I don't envy your year at all, I know it has been tough, but I think you've done a good job managing a less than ideal situation.Hopefully an offer comes soon!!

I think your debt restructure was a very good strategy. Best of luck to you on receiving a good offer soon. My BF has had his house on the market since May, with several offers but has yet to close. It is very frustrating.